Protocol-Owned Liquidity (PoL)
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Liquidity is a critical element of any Web3 project, as it underpins the token economy. Deep liquidity promotes market stability, reduces volatility, and builds trust among users. For Morpheus, this is especially vital to handle an ever-growing number of users and ensure fair rewards for contributors.
Morpheus Protocol-Owned Liquidity is liquidity owned and controlled by the protocol itself, rather than by individual liquidity providers. This approach ensures transparency, trust, and guarantees the protocol's long-term sustainability and independence.
Morpheus' Fair Launch began on February 8, 2024, marking the start of a 90-day Liquidity Bootstrapping phase. The objective of this phase was to generate yield for Morpheus using the Techno Capital Machine model to have sufficient liquidity to fulfill the utility functions of the network.
During this period, Capital Providers deposited their stETH into Morpheus Smart Contract and in return, rewarded with 24% of the daily MOR emissions.
By the end of the 90 days, nearly 800 stETH had been generated.
On May 8th 2024, yield earned by Morpheus from Capital Providers was successfully paired with MOR tokens taken from Protection Fund emissions and deployed as concentrated liquidity in the wETH/MOR pair on the Uniswap DEX on the Arbitrum chain. To maintain market stability, the liquidity range was adjusted weekly, gradually transitioning to a full range. The stETH (converted to wETH) yield generated during this period was periodically added to the liquidity pool, further supporting fair price discovery and enhancing market activity.
Following the AMM Initiation Phase, a portion of the stETH yield is used to market buy MOR tokens, while the remaining stETH (converted to wETH) is locked as Protocol-Owned Liquidity, in alignment with the guidelines outlined in the Morpheus Whitepaper.
Initially, 50% of the MOR was used to deepen liquidity during the bootstrap phase. As liquidity solidifies, the strategy shifts to buying 75% MOR to drive demand and increase token scarcity.
Yield generated by Capital Providers utilizes this way:
25% to add as Protocol-Owned Liquidity.
25% to buy MOR and add as Protocol-Owned Liquidity.
25% to buy and burn MOR, reducing circulating supply.
25% to buy and lock MOR for Epoch 2 tail emissions until 2040.
Eventually, the strategy could move to 100% MOR buyback when liquidity is deemed sufficient.
Morpheus is chain-agnostic by design and will gradually expand to multiple chains, enabling the acceptance of a wider variety of yield-bearing assets for capital provision.
With growing volumes and liquidity on Base, it has been selected as the second chain for Protocol-Owned Liquidity. The liquidity is deployed on Uniswap Base.
To further diversify and enhance PoL streams, the protocol has introduced small fees for various ecosystem elements. Currently, there is a 0.35% fee applied to the yield generated by MOR20-launched applications and withdrawals made by participants in the Builder rewards bucket.
There are ongoing discussions on ways to strengthen Protocol-Owned Liquidity, everyone is invited to join and share their ideas.
